S.S. Sodhi, J.
1. Failure on the part a registered firm in filing the return within the stipulated period and the imposition of penalty on that account under Section 271(1)(a)(i)(b) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), where the tax deducted at source or paid in advance is equal to or exceeds the tax payable by such firm, is the point in issue here
2. The assessee, Harish Chand and Co., was required to file its return of income on or before July 31, 1978. It did not, however, file any such return till April 7, 1982. Penalty proceedings were consequently initiated against it under Section 27 of the Act.
3. In dealing with this matter, it was found that the tax payable by the assessee was Rs. 2,550 whereas the tax deducted at source was Rs. 4,050. This being so, no tax was assessed as payable when the assessment was framed. The Income-tax Officer, however, proceeded to assess and impose a penalty of Rs. 7,660 treating the assessee as an unregistered firm for the purpose of calculation of this penalty. This penalty was, however, deleted in appeal by the Appellate Assistant Commissioner, whose order was later upheld by the Tribunal.
4. Two questions of law referred in this behalf are :
'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that no penalty could be imposed on a registered firm where tax assessed on it as a registered firm was nil even though as an unregistered firm it would be liable to tax ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the order of the Appellate Assistant Commissioner ?'
5. Conflicting views have been expressed by different High Courts on the matter in controversy here. One view, as projected by the High Court of Gujarat in CIT v. R. Ochhavlal and Co. : [1976]105ITR518(Guj) , being that if a registered firm has committed any of the defaults contemplated by Clauses (a), (b) and (c) of Section 271(1), it follows that the registered firm in question is a person 'liable to penalty ' within the meaning of Section 271(2). Once it is found that such a registered firm has rendered itself liable to penalty, then, under the deeming fiction which is contemplated by the latter part of Sub-section (2), such a firm should be treated as an unregistered firm and the quantification of penalty should be worked out on the amount which would be imposable on this firm as if it were anunregistered firm. Similar view has been expressed in C1T v. Priya Gopal Bishoyee, : [1981]127ITR778(Cal) ; Jamunadas Mannalal v. CIT : [1985]152ITR261(Patna) ; and CIT v. Govindram and Co. : [1987]168ITR613(Bom) .
6. In the forefront of the contrary opinion is the judgment of the High Court of Rajasthan in CIT v. Builders Engineers Co. , where it was held that if the entire amount of tax has already been paid, being deducted at source or paid in advance, the question of imposing any penalty on the 'assessed tax' does not arise because no tax is actually due. It was explained in this behalf that the penalty which can be imposed is ' a sum equal to 2% of the assessed tax for every month during which the default continued'. The expression 'assessed tax' in this context means 'tax as reduced by the sum, if any, deducted at source, under Chapter XVII-B or paid in advance under Chapter XVII-C'. Thus, where no amount of tax remains to be paid on completion of the assessment, the 'assessed tax' would be zero and any figure multiplied by zero would also be zero. In other words, no penalty would be payable.
7. In holding so, the court relied upon the rationale of the decision of the Supreme Court in Ganesh Dass Sreeram v. ITO : [1988]169ITR221(SC) , where the matter concerned was with regard to the payment of interest under Sub-section (8) of Section 139 of the Act for failure to file the return within time allowed under Sub-section (1) thereof. The Supreme Court held as under (headnote) :
'Where the advance tax duly paid covers the entire amount of tax assessed, there is no question of charging the registered firm with interest even though the return is filed by it beyond the time allowed, regard being had to the fact that payment of interest is only compensatory in nature. As the entire amount of tax is paid by way of advance tax, the question of payment of any compensation does not arise.'
8. A view similar to the one taken by the High Court of Rajasthan in Builders Engineers Co.'s case , is also to be found in Addl. CIT v. Murugan Timber Depot : [1978]113ITR99(Mad) ; CIT v. Patram Dass Raja Ram Bert ; CIT v. Maskara Tea Estate and P. Venkata Krishnayya Naidu and Sons v. CIT : [1984]150ITR545(AP) .
9. The view of the High Court of Rajasthan in Builders Engineers Co. 's case , is the one with which we, with respect, concur in preference to that of the High Court of Gujarat in R. Ochhavlal and Co.'s case : [1976]105ITR518(Guj) . It deserves note here that this view of the High Court of Gujarat and the other courts, where a similar view has been taken, was expressed before the judgment of the Supreme Court inGanesh Dass Sreeram's case : [1988]169ITR221(SC) . The reasoning as given by the Supreme Court there is clearly applicable to the issue raised and, therefore, it must be held that no penalty is payable where the tax deducted at source, and/or paid in advance is equal to or exceeds the assessed tax payable by a registered firm. Both the questions are consequently answered in the affirmative, in favour of the assessee and against the Revenue. This reference is disposed of accordingly. There will, however, be no order as to costs.